The $r$ rows of $Z$ are orthonormal (i.e., mutually orthogonal and with unit norm). You can therefore complete the set of rows to an orthogonal basis.
Let $Z'$ be the matrix whose rows are that basis. Then, $Z'$ is orthonormal ($Z' \cdot Z'^T = I$). But, this means that $Z'^T$ is also orthonormal since also $Z'^T\cdot Z' = I$. Thus, each column of $Z'$ is of unit norm. So, each column of $Z$ has less than unit norm.